Dunnellon racing to stave off financial disaster

Published: Tuesday, July 23, 2013 at 7:05 p.m.

Last Modified: Tuesday, July 23, 2013 at 7:05 p.m.

Dunnellon city officials began a race against the clock Tuesday to dump their troubled Greenlight telecommunications system before it bankrupts the city.

Interim City Manager Eddie Esch spent much of the day on a conference call with the lender who financed the $8 million system, explaining what the city is doing to keep Greenlight afloat and find a new owner.

Meanwhile, a consultant hired by the City Council continued negotiating with possible buyers for the system.

Esch said over the next few days, officials hope to reach a tentative agreement with one of the three private companies hoping to take over Greenlight. Then they hope to get the bank’s approval of the sale and bring it to the City Council for a vote by the end of next week.

Time is of the essence, Esch said, because the daily costs of running Greenlight are coming out of the city’s reserves, and the money is running out quickly.

“We don’t have any choice,” Esch said Tuesday. “We have to stop the spending, stop the bleeding.”

Greenlight was launched in 2011 to provide high-speed Internet, phone and cable service to customers in and around Dunnellon.

But while supporters hoped the system would be an attractive lure for new residents and businesses, it never fulfilled its promise financially.

Esch said Tuesday that the system has attracted roughly the number of customers — 500 — that officials had expected to serve by this time.

The problem, he said, is that Greenlight was not properly funded from the start. He said the city should have borrowed and budgeted enough money to cover the system’s losses until it grew large enough to break even after about five years, but it did not.

In recent months, city officials and council members became concerned about the mounting losses and ordered a financial review.

Richard Powell, a Lake City accountant hired by the council to assess the city’s finances, revealed Monday night that the losses were significant and that the city would have to declare a state of financial emergency. That financial emergency would have to be reported to Gov. Rick Scott, and then the city would be expected to come up with a plan within 45 days to solve the problem.

What Powell discovered during his review was that city administrators had used roughly $2.6 million in bond money set aside for water and sewer projects to offset the losses from Greenlight.

Esch estimated that figure could be as high as $3.1 million now.

He insisted, however, that the water and sewer projects for which the bond money was borrowed will continue because there is enough money to cover them. Still, by using a portion of the money for something other than water and sewer projects, the city may have violated its agreements with the bank, he said.

Esch said when he learned that was happening, he moved to protect the remaining bond money. The continuing losses from Greenlight are now being covered out of the city’s reserves, but that fund is dwindling.

Dunnellon Mayor Nathan Whitt said it was “very troubling” that city administrators — namely former City Manager Lisa Algiere — had dug such a deep financial hole for the city. Algiere resigned in May, citing personal reasons, and the City Council named Esch the interim city manager.

Whitt said it is imperative that the city find a company to take over Greenlight and assume the daily operational costs.

“I know we need it to happen quickly, but the who, the what, the when, I do not know,” he said. “Now that we’ve uncovered the truth, we don’t want it to go a day longer than we have to.”

Esch said even if the city manages to get rid of Greenlight, it likely will be saddled with significant debt from the system.

The city borrowed about $8 million to build and launch Greenlight, and it is unlikely that a private company would be willing to assume the entire debt. As a result, the city would probably have to keep much of the debt and pay it off over time.

“Unfortunately, the losers ultimately are the city of Dunnellon residents,” Esch said,

Without much discretionary revenue to pay off the debt, the city may be forced to “come up with new revenue streams,” he said. That could include new recreation fees or some other kinds of user fees “that people would be happy to pay because at least they’d be getting something out of it.

“What we don’t want to do is run everybody out of town with taxes. We don’t want to jack up taxes, jack up fees, turn this into a ghost town.”

Whitt said he looks forward to resolving the Greenlight debacle and getting the city back on solid financial footing.

“We will get ready for this budget year and live within our means,” he said. “We are not Tampa. We are not Orlando. We are a little town of fewer than 2,000 people.”

<p>Dunnellon city officials began a race against the clock Tuesday to dump their troubled Greenlight telecommunications system before it bankrupts the city.</p><p>Interim City Manager Eddie Esch spent much of the day on a conference call with the lender who financed the $8 million system, explaining what the city is doing to keep Greenlight afloat and find a new owner.</p><p>Meanwhile, a consultant hired by the City Council continued negotiating with possible buyers for the system.</p><p>Esch said over the next few days, officials hope to reach a tentative agreement with one of the three private companies hoping to take over Greenlight. Then they hope to get the bank's approval of the sale and bring it to the City Council for a vote by the end of next week.</p><p>Time is of the essence, Esch said, because the daily costs of running Greenlight are coming out of the city's reserves, and the money is running out quickly.</p><p>“We don't have any choice,” Esch said Tuesday. “We have to stop the spending, stop the bleeding.”</p><p>Greenlight was launched in 2011 to provide high-speed Internet, phone and cable service to customers in and around Dunnellon.</p><p>But while supporters hoped the system would be an attractive lure for new residents and businesses, it never fulfilled its promise financially.</p><p>Esch said Tuesday that the system has attracted roughly the number of customers — 500 — that officials had expected to serve by this time.</p><p>The problem, he said, is that Greenlight was not properly funded from the start. He said the city should have borrowed and budgeted enough money to cover the system's losses until it grew large enough to break even after about five years, but it did not.</p><p>In recent months, city officials and council members became concerned about the mounting losses and ordered a financial review.</p><p>Richard Powell, a Lake City accountant hired by the council to assess the city's finances, revealed Monday night that the losses were significant and that the city would have to declare a state of financial emergency. That financial emergency would have to be reported to Gov. Rick Scott, and then the city would be expected to come up with a plan within 45 days to solve the problem.</p><p>What Powell discovered during his review was that city administrators had used roughly $2.6 million in bond money set aside for water and sewer projects to offset the losses from Greenlight.</p><p>Esch estimated that figure could be as high as $3.1 million now.</p><p>He insisted, however, that the water and sewer projects for which the bond money was borrowed will continue because there is enough money to cover them. Still, by using a portion of the money for something other than water and sewer projects, the city may have violated its agreements with the bank, he said.</p><p>Esch said when he learned that was happening, he moved to protect the remaining bond money. The continuing losses from Greenlight are now being covered out of the city's reserves, but that fund is dwindling.</p><p>Dunnellon Mayor Nathan Whitt said it was “very troubling” that city administrators — namely former City Manager Lisa Algiere — had dug such a deep financial hole for the city. Algiere resigned in May, citing personal reasons, and the City Council named Esch the interim city manager.</p><p>Whitt said it is imperative that the city find a company to take over Greenlight and assume the daily operational costs.</p><p>“I know we need it to happen quickly, but the who, the what, the when, I do not know,” he said. “Now that we've uncovered the truth, we don't want it to go a day longer than we have to.”</p><p>Esch said even if the city manages to get rid of Greenlight, it likely will be saddled with significant debt from the system.</p><p>The city borrowed about $8 million to build and launch Greenlight, and it is unlikely that a private company would be willing to assume the entire debt. As a result, the city would probably have to keep much of the debt and pay it off over time.</p><p>“Unfortunately, the losers ultimately are the city of Dunnellon residents,” Esch said,</p><p>Without much discretionary revenue to pay off the debt, the city may be forced to “come up with new revenue streams,” he said. That could include new recreation fees or some other kinds of user fees “that people would be happy to pay because at least they'd be getting something out of it.</p><p>“What we don't want to do is run everybody out of town with taxes. We don't want to jack up taxes, jack up fees, turn this into a ghost town.”</p><p>Whitt said he looks forward to resolving the Greenlight debacle and getting the city back on solid financial footing.</p><p>“We will get ready for this budget year and live within our means,” he said. “We are not Tampa. We are not Orlando. We are a little town of fewer than 2,000 people.”</p>